A new $20 million property development fund is being set up, partly to chase "good opportunities that will emerge" in the Christchurch rebuild in the next two years.

Investors are being sought for the fund jointly formed by boutique merchant bank Murray & Co and construction company Arrow International, who will together provide seed capital of at least $2m.

Both Murray & Co and Arrow have a strong Christchurch presence and while they see opportunities for development emerging from the earthquake rebuild, the first project is more likely to start outside the damaged city.

Their Arco Property Fund will be launched to sophisticated "eligible persons" in late January.

Given the already emerging demand from investors it could close relatively quickly with the first related-property development possibly to take place by March.

"The indicators we have are there is strong interest," Murray & Co managing director Justin Murray said.

Murray and Arco fund chairman Rob Campbell said there was a relative scarcity of property development funding and activity in New Zealand.

This flowed on from the global financial crisis, and the collapse of the finance company sector in New Zealand, Murray said.

But there were opportunities around the country, and the Christchurch rebuild was "really starting to gain momentum now. The pace is increasing. This is a property development fund, so it's not a property investment fund. It's not looking to buy and hold," he added.

The three-person board also included Bob Foster, the co-founder of Arrow International.

While $20m was being sought, the fund had no minimum or maximum size and could settle at $15m or $30m depending on demand in the capital-raising process, he said.

The "eligible" investors needed to be independently certified as satisfying net asset thresholds, and put in a minimum $250,000 to the fund. Given they were "sophisticated" there was no need for the issue of a prospectus with the fund, Murray said.

"That said, we are absolutely mindful of the need to ensure that we supply reasonable and accurate information."

Developments could be a mixture of equity from the fund plus debt, Murray said.

However, no more than a third of the fund's capital would be committed to any one project. The company saw opportunities spread evenly within the industrial, office, retail and residential development spheres, he said.

Projects would be managed through to completion, sold, and the proceeds would be distributed to investors. The margin on a development could be from 15 per cent to